What Is A Blue Chip Stock

Should You Invest In Pepsico Inc. (NYSE:PEP)

Normally you would consider PepsiCo Inc. ( PEP ) a straight forward investment since it is a blue chip stock. However, it makes good investment sense to periodically review the investment case for blue chip stocks. This is to make sure we know why the market is currently in love with or out of favor with the stock. If we can feel assured that the market is under pricing the stock significantly then we may look to enter the stock with a suitable investment horizon in mind.

Currently, analysts' one year target price estimates range from a low of $71 to a high of $85, with a consensus of $78. Moreover, currently nine analysts rate the stock as ‘Strong Buy', two as ‘Buy', and five as ‘Hold'.

In the last four quarters ended March 2011, the company's reported EPS either met or exceeded analysts' consensus estimates. The company is expected to announce Q2 2011 results on Thursday, July 21 at 8 a.m. For Q2 2011, the consensus EPS forecast has remained the same over the past week at $1.210 and remained the same over the past month at $1.210. For FY2011, the consensus EPS forecast has remained the same over the past week at $4.490 and remained the same over the past month at $4.490. So, I believe, the current weakness in the stock is more due to ‘profit booking' rather than any concerns about financial performance or position.

Recent developments

A few days back, the Canadian Unit of Pepsico announced that it will sell its 7UP soft drinks in 100 percent recycled Pet bottles, food-grade bottles that meets all regulatory requirements and are of the highest quality. The bottles, which will be introduced in early August, will have the same look and feel as the existing bottles, but will be made of the recyclable material. Though this looks more like a cosmetic or PR move, I reckon it is not so. I think that moves such as this will position the company for consideration in ‘responsible investing indices' as the new bottles reduce the company's overall carbon footprint and also reduce energy consumption. As a company's stock is included in more indices, liquidity, price discovery and price stability of that company's stock increase. So, the company's current ecological drive makes sense both business-wise and environment-wise.

Toward the end of first week of July, the company announced that it will buy the remaining 23 percent of Wimm-Bill-Dann Foods OJSC (WBD), Russia's leading branded food and beverage company. Wimm-Bill-Dann produces dairy products, juices, mineral water and baby food. A few months back, the company acquired its current 77 percent stake in WBD. That purchase helped PepsiCo boost its Q1 revenue by 27 percent year-over-year. The latest deal is expected to close in September 2011. This deal will strengthen its foothold in the fast-growing Eastern European and Central Asian markets in days to come. This brings the company closer to its strategic goal of building a $30 billion nutrition business by 2020.

Stock Brokerage - Do you know any blue chip stocks with stable ...

I don’t think you can find a blue chip with a stable dividend history. One of the reasons they are blue chips are increasing value, both in price and dividends.

Look at the utilities.

The paramount factor in the DDM is the future value of the dividend. So I would think GE or IBM would be a good pick.

There are way to many assumptions that can not be realistically forecast for the DDM to be useful anyway.

Good luck in class… hope your prof has real world experience.

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